Asia, Mideast petrochemical trades to slow down during Ramadan

SINGAPORE (ICIS)–Trades for several petrochemicals in Asia and the Middle East will slow down as markets observe Ramadan starting 10 March, with demand going into a lull amid shorter working hours during the Muslim fasting month.

• Converters hold ample inventory
• GCC demand for PP to rebound after Eid ul-Fitr
• Gaza conflict dampens EastMed market, outlook uncertain

Most markets continue to struggle with poor demand as well as high cost amid geopolitical uncertainties in the Middle East and Europe.

From 10 March, businesses in many Muslim-majority countries will operate on reduced hours, potentially affecting production and logistics, with significant business decisions likely to be postponed.

INDONESIA IMPORT QUOTA FURTHER DAMPENS SENTIMENT
In Indonesia – the world’s most populous Muslim nation and the second largest polyethylene (PE) consumer in southeast Asia after Vietnam – the seasonal slowdown in demand is exacerbated by uncertainties over the government’s import quota regulations.

Industry players were recently informed by Indonesia’s trade ministry that most PE and PP grades would be exempted, but some worry that this could still change before the import quotas take effect on 10 March.

Many converters are currently sitting on high stocks of PE, having boosted imports in the weeks after the government announced the new rules in December, before details were fleshed out.

A few of them are now willing to re-enter the import market to order new supplies.

“My customers have stopped talking to me for now. It’s both Ramadan and the import quota issue,” said a PE supplier.

“I feel that while prices have not really dropped … the demand has clearly slowed. Most buyers have already bought enough, and they are not willing to risk buying more,” the supplier said.

“Ramadan and Lebaran (Eid ul-Fitr) are slow periods of demand,” he added.

Eid ul-Fitr is a Muslim festival marking the end of Ramadan.

In the upstream ethylene market in southeast Asia, inquiries from Indonesia have picked up since late February as buyers stock up for April and wanted to wrap up negotiations before Ramadan.

Ethylene prices have increased because of tight supply amid operating issues at Chandra Asri’s cracker as well as limited supply coming from the Middle East.

MIDEAST TENSIONS WEIGH ON TRADES
Demand for both PE and PP in the Gulf Cooperation Council (GCC) is expected to improve after Eid ul-Fitr, as buyers restock after Ramadan’s lull.

In the East Mediterranean market, sentiment is likely to remain weak amid the Israel-Hamas war in Gaza.

The war, now on its eighth month, and the weak economies of Lebanon and Jordan have dampened activity in both the PE and PP markets. Market conditions may not improve if a resolution to the war cannot be found soon.

Since the start of the Israel-Hamas war on 7 October, sentiment was dampened throughout the region, with buyers in Jordan and Lebanon adopting a wait-and-see approach on markets.

Hopes of an Israel-Hamas ceasefire ahead of Ramadan are fading following reports of more than 100 deaths of people waiting in a food aid line in Gaza.

More than 100 people were killed on 29 February after Israeli troops fired on a large crowd of Palestinians racing to pull food off an aid convoy late last month, bringing the death toll since the start of the Israel-Hamas war to over 30,000, according to the Gaza Health Ministry.

A continuation of hostilities beyond the start of Ramadan is now highly likely as several key issues remain unresolved. This could inflame tensions in the region significantly, with attacks by Yemen’s Houthi militants on shipping in the Red Sea likely to escalate.

In toluene diisocyanate (TDI) and polymeric methylene diphenyl diisocyanate (PMDI) markets, GCC trades recently accelerated as some customers looked to stock up on volumes following recent spikes in costs of feedstock benzene and toluene in Asia.

Some northeast Asian isocyanates producers announced sharp price increases in southeast Asia, which also impacted their volume allocations to other regions like the Middle East.

In March and April, when supply for both TDI and PMDI is expected to be tight to normal due to some turnarounds in Asia, demand from GCC countries will likely slow down.

Most businesses in the Middle East work fewer hours during Ramadan, which will impact overall activity.

Focus article by Nurluqman Suratman

Additional reporting by Josh Quah, Izham Ahmad and Damini Dabholkar

Thumbnail image: Welcoming Ramadhan 2024, Medan, Indonesia – 27 February 2024 (Sutanta Aditya/NurPhoto/Shutterstock)